Although I am not an expert at computers and stuff I do love hacks! Just the ones that deal with finances. Yeah, who doesn’t love money? And sometimes one has to borrow money to fulfill our needs and dreams – one of them is owning a home. Now, people do love the part where they have a home to call their own but not the part that helps them get one – I am talking about Home Loan EMI. That time of the month when you have to pay for the dream that you’ve just realized. You may be hating it right now, but there are ways to manage them. Some ways can help you reduce that burden you think you have to bear for a good part of your life. Well, here we go.
Some hacks to reduce your Home Loan EMI:
Higher Down Payment:
You see, a Home Loan consists of 2 parts. The money you borrow and the money you shell out of your own pocket. Now, it doesn’t take a genius to guess that you pay interest only on the part that you borrow (which can be up to 90% of the total house buying cost). Ergo, the more you shell out of your pocket, the less you pay in interests to the bank and lesser becomes your EMI (it’s like magic!). Of course, I am assuming you’ve done the calculations and have a good enough idea about how much you can afford to put up as a down payment (ironic right – you put up what you down pay!)
Longer Repayment Period:
Well, this isn’t a hack I’d advise everyone depending on what their need exactly is. But if you’re just looking to reduce that EMI amount, then you can definitely think about this. You see, as the available duration to pay your dues increases, your dues per month decrease. For example, if you borrow 100 bucks that you need to pay back in 4 months, then you’d need to pay Rs.25 per month (assuming you convinced the lender to lend you at 0% ROI. And then put me in touch with him/her as well). But, if that Good Samaritan lets you pay in 5 months instead of 4, then you pay up only Rs.20 per month. Get it? But be aware, this will increase the total interest that you pay over the course of your loan.
I call this the Dark Knight. Because it solves many issues that people face with EMIs and Loans in general. It not only helps to reduce the EMI amount but also helps in completing the loan earlier (amongst other advantages). How? Well, when you prepay (home loan prepayment), the amount is used to settle the outstanding Principal component of your borrowing, thus drastically cutting down on the remaining sum borrowed which results in reduced EMIs or reduced loan tenure – you choose. Perhaps if your prepayment amount is handsome (or beautiful, whatever you prefer) enough, you may get a reduced loan tenure along with reduced EMI.
Step-Down EMI Plan:
This is a plan that is particularly helpful for people close to retirement. Okay, fair warning, I am going to sound contrary to what I’ve been talking about till now but hang on, alright! In a step-down EMI plan, you choose to go for higher EMI at the beginning of your loan. This helps you repay a good portion of the loan at the start and gradually, the EMI decreases as the outstanding amount does so as well. It’s like you climb up the hill in the beginning if you want to relish the cool breeze on top.
As we’re in the midst of a pandemic with the job market not looking so bright, perhaps your bank may reduce the interest rate on your loan a bit for a particular time duration. It will be in their interest to get back the money at a reduced ROI than not getting it back at all. Or perhaps, your work is going fine and you’re able to manage your finances well, but still who doesn’t love having their EMIs reduced? Well, if you happen to have availed your loan at a floating rate of interest then you can always ask your lender to reduce the ROI as and when it is reduced by RBI as well.
The rate of interest is never the same with all lenders. It changes depending on various factors and some lenders offer lesser ROI than others. Assuming you’re a smart person and have evaluated and compared all the factors between multiple lenders, you can opt to home loan balance transfer your remaining loan to another bank/NBFC that is offering a lower rate of interest. Needless to say, your home loan EMI reduces. Reduces, that’s what I meant, but did you see how creative I can be!
So, now you’re a hacker as well that knows how you can hack those pesty EMIs and repay your Home Loan like the cool breeze they can be.
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